100. Neither A or B are particularly attractive
but the third one of a memorandum of understanding between governments
on matters would be, in a sense, the preferable one? (Mr
Salzmann) That is the one which, certainly for companies who
have told us their views, they would prefer. That would give a
measure of control which the British Government and other interested
parties would accept.

101. That would accord with the representation
we had from the NGOs. (Major General Sharman) I think,
too, picking up on the point Mr O'Neill made, many American sales,
particularly to less sophisticated countries, are done government-to-government
under the Foreign Military Sales scheme. Also, much of the rationale
behind American controls is avoidance of the transfer of military
technology, which is a much more powerful deterrent than it is
for the UK.

102. May we move on to the other aspect and
that is the whole question of administrative licensing procedures,
on which I think you may have a view, where Scott suggested that
a whole host of things should be put on a statutory basis. The
White Paper and this draft do not do that at all. In fact, it
argues quite strenuously against it. I wonder if you would like
to have any thoughts on the whole issue of administrative licensing
procedures being put on a statutory basis? (Major General
Sharman) Generally we are disappointed, given the background
of the Scott Report, in all of this, that the Government has not
chosen to enact something in primary legislation or propose something
which would satisfy some of the Scott recommendations, which were
clearly to the benefit of the industry. He made a specific recommendation,
the introduction of a system for granting licences that is fair
and expeditious. We have given up lobbying on the basis of trying
to get licence default acceptance after time.

103. No one seems to support that. (Major
General Sharman) We are disappointed, of course, and we would
have liked it but we understand the reasons, particularly as ministers
always wish to consider things on a case-by-case basis. It is
worth remembering what Scott said, I have already made one point
this morning. He made no recommendations about a number of the
issues that are now being proposed at all, and he was as keen
to help industry as he was to achieve other things. We are disappointed
but, again, that might be reflected in the secondary legislation.
Our main concern, and I am very grateful to you, Chairman, because
I know it is as much a concern of yours, is the time that licences
take to process. It is a pity that Mr Knowles was not able to
join us because he has a licence application which has never yet
been refused, to which he sends a birthday card, I think he is
about to send his third birthday card. There is a lot to be done
to improve the process.

104. Our Committee has a good record, if you
look at our three reports, on appeals, refusals and on this limbo
world of undeclared moratorium consent. The Pakistani case was
one of them. You accept that there should not be (Major
General Sharman) We understand why.

105. I do not think there is any support for
default. There is a suggestion that the review procedure of appeals
should be established. (Major General Sharman) There
is an appeals procedure.

Mr Salzmann: If you make it formal we
would fully support that.

Chairman

106. What about the whole business of refusals,
information refusals and information regarding refusals? (Major
General Sharman) Again, if a reason is given it is useful.
I have to say in fairness that there has been considerable opening
up by Government and the relationship now and access to information
for individuals is much better than it was. One particularly encouraging
breakthrough is the opportunity that industry has had to talk
to desk officers in the Foreign Office, which was a completely
opaque part of the situation before. That has helped people understand
the reasons why things are difficult. We draw the attention of
our members to the Foreign Office Commitments on the FCO website
so they have a better understanding of whether they are likely
to have a refusal. There is great scope for improvement and we
do think that officials are often nervous because they themselves
are uncertain as to what is meant, so we do hope the eventual
outcome of this Bill will be much more clarification.

Mr Chope

107. Looking at paragraph 67 of this document,
where the Government says that it has a priority to reach decisions
on export licence applications quickly, do you think that the
Government is delivering what it says it intends to do in paragraph
67? (Mr Salzmann) It is trying to do. The figures that
the Government always quote are for achievement of the 20 working
days target time scale, you very rarely have any sight of thethey
quote 70 per cent target to achieve that30 per cent ones
and how much do some of the cases of the 30 per cent miss the
20 days. Certainly in the past in response to the publication
of the annual reports we have proposed that it would be extremely
useful to have an annex at the back listing details, going into
much greater details of the turnaround of licences and in particular
listing some details of the top 20 worst case nightmares, where
the licences have been in the system for two or two and a half
or three years. We are aware of some of these cases, but we are
not aware of all of them, where licences have been in the system
for over three years. We welcome that being in the Annual Report
and being given some publicity.

108. Name and shame? (Major General Sharman)
Yes. An early refusal is better than protracted uncertainty. If
the business is at risk from delay, and we have plenty of such
cases, then at least if there is an early refusal there is then
an opportunity to appeal and provide more information and produce
a more robust end user certificate. (Mr Salzmann) Also,
there would be some hold on the rival companies from the EU partner
nations under the EU Code of Conduct if there has been a refusal.
In one particular case the licence is still in the system over
three years, the company knows that business has now gone way,
the customer has gone to somebody else and that that somebody
else has had no problem getting the export licence but the company
has left the licence application in the system just out of curiosity
to see how long it is going to take and see if they can get into
the Guinness Book of Records.

109. Do you have a similar story? (Mr
McLaughlin) I endorse what my colleagues said generally, in
particular the point that an early refusal is better than a six
or eight monthand we have experience of those as recently
as last yearblack hole approach. Under the EU Code a refusal
is notified to other EU nations who should then require companies
to comply. If there is no such notification then clearly we are
disadvantaged by the six or eight month black hole.

110. It is a point we made forcibly in one of
our reports quite recently and gave a specific example. (Mr
McLaughlin) We would much prefer, whatever organisation or
whatever sector of the defence industry is concerned, a regime
where an early notification, albeit a refusal, was the preferred
solution or outcome.

Mr Rowe

111. It seems to the layman that for the Department
to say, "This looks like being a very difficult one",
quite quickly would be of help but not an outright refusal. Would
that be helpful? (Major General Sharman) Yes. Given
that the number of refusals is quite small and that number approved,
where they are not particularly controversial, is at least 70
per cent. You are right, that would be better. (Mr McLaughlin)
Because of the dialogue that my colleagues have already referred
to, if there is an early notification or "red tagging",
that there is a potential problem then because of the more open
dialogue that would result it would be easier to track and follow
it through from the company's point of view. (Major General
Sharman) It is also the company that has to explain to the
customer. Customers do get very sensitive about these things and
feel themselves affronted to be thought of as unsuitable or inappropriate.
Again, an early reaction would at least mean that the Government
and the company could work together on the right sort of response.

Chairman

112. Thank you very much. Do you think as a
result of this Bill we are going to see more judicial reviews
of decisions? Do you think a Bill of this kind or an Act of this
kind will lead to a spawn in a judicial reviews of these decisions
more than previously? (Major General Sharman) I honestly
do not know. Clearly if there is a clear body of law then it opens
up the possibility. People have been very unsure. Companies are
always in a very difficult position here because certainly under
the current uncertain regime, they have felt that if they rock
the boat too much then (and the same thing can happen in domestic
defence procurement) things will be made difficult for them next
time. If there is a clear body of law then I guess that companies
may respond with some sort of legal action. Generally speaking,
however, relationships are not adversarial.

Chairman: Thank you very much indeed.
Thank you for taking the time to come before us. These are early
days and there are a lot more, not only on the shell of the Bill
that is before us but on the draft secondary legislation. I think
these committees in the next Parliament will be just as interested
in that as this. Thank you very much indeed for coming.